CAPITAL AREA GROUNDWATER CONSERVATION DISTRICT BATON ROUGE, LOUISIANA. Financial Report As of and for the Year Ended June 30,2018

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1 BATON ROUGE, LOUISIANA Financial Report As of and for the Year Ended June 30,2018

2 Financial Report As of and for the Year Ended June 30,2018 TABLE OF CONTENTS Introductory Section Table of Contents Page No. i Financial Section Independent Auditors' Report 1 Required Supplementary Information (Part 1 of 2) Management's Discussion and Analysis 5 Statement of Net Position 10 Statement of Activities 11 Statement of Cash Flows 12 Notes to Financial Statements Index 15 Notes 16 Required Supplementary Information (Part 2 of 2) Budgetary Comparison Schedule 35 Schedule of Employer's Share of Net Pension Liability 36 Schedule of Employer Contributions to the Pension Plan 37 Schedule of Employer's Proportionate Share of Total Collective OPEB Liability 40 Supplementary Information Schedule of Per Diem Paid to Commission Members 42 Schedule of Compensation, Benefits and Other Payments To the Agency Head or Chief Executive Officer 43 Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 44 Schedule of Findings and Responses 46 1

3 Financial Report As of and for the Year Ended June 30,2018 Summary Schedule of Prior Year Findings 47 Independent Accountant's Report on Applying Agreed Upon Procedures 50

4 John L. McKowen Certified Public Accountant 2178 Myrtle Avenue Baton Rouge, Louisiana Fax (225) M -5 jlnickowen@cox.net INDEPENDENT AUDITOR'S REPORT Board of Commissioners Capital Area Groundwater Conservation District Baton Rouge, Louisiana Report on the Financial Statements I have audited the accompanying financial statements of the business-type activities of the Capital Area Groundwater Conservation District (the District), a related organization of the State of Louisiana, as of and for the year ended June 30,2018, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility My responsibility is to express opinions on these financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, 1 express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 1 believe that the audit evidence 1 have obtained is sufficient and appropriate to provide a basis for my audit opinions. Member American Institute of Certi^d Public Accountants Society of Louisiana Certified Public Accountants

5 Opinion In my opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Capital Area Groundwater Conservation District as of June 30, 2018, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As disclosed in note 8 to the financial statements, the net pension liability for the District was $257,621 at June 30, 2018, as determined by the Louisiana State Employees' Retirement System (LASERS). The related actuarial valuation was performed by LASERS' actuary using various assumptions. Because actual experience may differ from the assumptions used, there is a risk that this amount at June 30, 2018 could be over or under stated. My opinion is not modified with respect to this matter. As discussed in notes 1, 9 and 14 to the financial statements, the District implemented Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions - superseding portions of GASB Statement No. 45 and GASB Statement No. 57, for the year ended June 30, The adoption of these standards required the District to record its proportionate share of other postemployment benefits related to its participation in a defined-benefit, multi-employer other postemployment benefit plan, restating the previous year. As a result of the implementation, the District's net position increased by $63,378. My opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management's discussion and analysis on pages 5-8, budgetary comparison information on page 35, schedule of employer's share of net pension liability on pages 36-39, and schedule of employer's proportionate share of the total collective OPEB liability on page 40 be presented to supplement the basic financial statements. Such information, although not part of the basic financial statements is required by the Governmental Accounting Standards Board, who consider it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. 1 have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to my inquiries, the basic financial statements, and other knowledge I obtained during my audit of the basic financial statements. 1 do not express an opinion or provide any assurance on the information because the limited procedures do not provide me with sufficient evidence to express an opinion or provide any assurance. Other Information My audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District's basic financial statements. The Schedule of Per Diem Paid to District Members

6 and Schedule of Compensation, Benefits and Other Payments to the Agency Head or Chief Executive Officer on pages are presented for purposes of additional analysis and are not part of the basic financial statements. This supplemental information is the responsibility of management and was derived from is related directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In my opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, I have also issued my report dated December 14, 2018, on my consideration of the Capital Area Groundwater Conservation District's internal control over financial reporting and on my tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of my testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Capital Area Groundwater Conservation District's intemal control over financial reporting and compliance. John L. McKowen, CPA Baton Rouge, Louisiana December 14, 2018

7 REQUIRED SUPPLEMENTARY INFORMATION (PART 1 OF 2)

8 MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30,2018 The purpose of this section is to offer a narrative overview and analysis of the Capital Area Groundwater Conservation District's (hereafter referred to as the District) financial performance - past and present - and its future prospects. It focuses, however, on the current year activities, resulting changes and currently known facts. It should be read in conjunction with the financial report taken as a whole. Overview of the District The Capital Area Groundwater Conservation District was created under the provisions of Louisiana Revised Statutes 38: to provide for the effective administration, conservation, orderly development, and supplementation of groundwater resources within the conservation district, which is composed of the parishes of East Baton Rouge, East Feliciana, Pointe Coupee, West Baton Rouge, and West Feliciana. The District monitors the usage of groundwater within the District and provides assistance through the United States Geological Survey for the development of new sources of groundwater. The District is governed by a board of commissioners composed of seventeen members appointed by the governor. The accompanying financial statements of the Capital Area Groundwater Conservation District have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to govemmental units. The Govemmental Accounting Standards Board (GASB) is the accepted standard-setting.body for establishing govemmental accounting and financial reporting principles. Overview of the Financial Statement Presentation These financial statements are comprised of these components - (1) management's discussion and analysis, (2) basic financial statements, (3) notes to the financial statements and (4) required supplemental information. There is also other supplemental schedules and information contained in this report provided for additional information. Basic Financial Statements. The basic financial statements present information for the District as a whole. Statements in this section include the following: Statement of Net Position. This statement presents assets, deferred outflows of resources, liabilities, and deferred inflows of resources separately. The difference between assets plus deferred outflows and liabilities plus deferred inflows is net position, which may provide a useful indicator of whether the financial position of the Capital Area Groundwater Conservation District is improving or deteriorating. Statement of Revenues, Expenses and Changes in Net Position. This statement presents information showing how the District's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. This statement is designed to show the District's financial reliance on general revenues. Statement of Cash Flows. The change in cash as a result of current year operations is depicted in this statement. The cash flow statement includes a reconciliation of operating income (loss) to the net cash provided by or used for operating activities as required by GASB No

9 STATE OF LOUISIANA MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30,2018 The basic financial statements can be found on pages of this report. Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the basic financial statements. The index of the notes is found on page 16 with the actual notes beginning immediately afterwards. Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain other information that is deemed useful to readers of this report. Financial Analysis of the District Net position is an indicator of the District's financial position from year to year. A summary of net position follows. SUMMARY OF NET POSITION (As restated) Assets Current assets $ 866,410 $ 664,585 Restricted assets 169, ,731 Non-current assets Total Assets Deferred Outflows of Resources 52,180 73,526 Liabilities Current liabilities 64,885 8,542 Non-current liabilities Total Liabilities Deferred Inflows of Resources 11,067 14,039 Net position Invested in capital assets, net of related debt 257, ,694 Restricted 169, ,731 Unrestricted ,471 Total Net Position Between June 30, 2017 and June 30, 2018, the net position of the District increased by $202,826.

10 MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2018 A summary of changes in net position is as follows: SUMMARY OF CHANGES IN NET POSITION Operating Revenues Operating Expenses Operating Income (Loss) Non-operating Revenues (Expenses) Change in Net position $ 583,483 $ 565, ) ) 200, , Operating revenues increased by $18,135 or 3%. Expenses decreased by $39,032 or 16% of those in the prior year. Cash flow activity of the District for the past two years is as follows: STATEMENT OF CASH FLOWS Cash and cash equivalents provided by (used for): Operating activities $ 242,125 $ 276,517 Non-capital financing activities - - Capital and related financing activities (6,563) (1,400) Investing activities ) Net Increase(decrease) in Cash and Cash Equivalents 197, ,101 Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Budgetary Highlights Revenues were less than anticipated by $14,588 or 2%. Expenses were less than budgeted $253,824 or 40%. This resulted in a favorable change in net position that was $239,236 more than budgeted. Capital Asset and Debt Administration Capital Assets: The District's investment in capital assets, net of accumulated depreciation, at June 30, 2018 and 2017, was $257,871 and $261,594, respectively. The most significant capital asset is the District's connector well at a total initial cost of $370,025.

11 MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30,2018 Capital assets at year-end are summarized as follows: CAPITAL ASSETS Net of Accumulated Depreciation Non-depreciable Assets Land Depreciable Assets Connector well Equipment, furniture and fixtures On-line bill payment system Total 2018 $ 11, $ 11, , ,196 2,919 2, Capital acquisitions during the year included equipment costing a total of $1,563 and an on-line bill payment system costing $5,000. Debt Administration: Long-term debt of the District includes compensated absences at amounts of $10,095 and $7,383 at June 30, 2018 and 2017, respectively. There is also an actuarially determined obligation for post-employment benefits of $108,049 at June 30, 2018, down from $174,728 at June 30, 2017, and net pension liability of $257,621, down from $271,463 at June 30, Request for Information This financial report is designed to provide a general overview of the District's finances, comply with finance-related laws and regulations and demonstrate the District's commitment to public accountability. Any questions or requests for additional information can be obtained by contacting Mr. Anthony J. Duplechin at 3535S. Sherwood Forest Boulevard, Suite 137, Baton Rouge, Louisiana 70816,

12 BASIC FINANCIAL STATEMENTS

13 BATON ROUGE, LOUISIANA STATEMENT OF NET POSITION JUNE 30,2018 ASSETS Current Assets Cash and cash equivalents Accounts receivable, net Prepaid expenses Total Current Assets Business-type Activities 700, ,536 4, ,410 Restricted Assets Funds in funded retiree health benefits trust 169,151 Non-Current Assets Certificates of deposit Capital assets, net of accumulated depreciation Total Non-Current Assets 124, , ,698 Total Assets $ 1,418,259 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows related to pensions Deferred outflows related to other post-employment benefits Total Deferred Outflows of Resources LIABILITIES Current Liabilities Accounts payable Accrued expenses Total Current Liabilities Non-Current Liabilities Compensated absences payable Other post-employment benefits plan payable Net pension liability Total Non-Current Liabilities 46,099 6,081 52,180 63,587 1,298 64,885 10, , , ,765 Total Liabilities 440,650 DEFERRED INFLOWS OF RESOURCES Deferred inflows related to pensions Deferred inflows related to other post-employment benefits 4,872 6,195 Total Deferred Inflows of Resources 11,067 NET POSITION Invested in capital assets, net of related debt Restricted Unrestricted Total Net Position 257, , ,700 $ 1,018,722 The accompanying notes are an integral part of these statements. 10

14 BATON ROUGE, LOUISIANA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION YEAR ENDED JUNE 30,2018 OPERATING REVENUES Business-type Activities Pumpage fees $ 583,483 Total Operating Revenues 583,483 OPERATING EXPENSES Salaries 103,952 Other employee expenses 31,872 Other post employment benefits 2,894 Compensated absences 251 Depreciation 10,385 Information technology 8,661 USGS - Real time network 8,820 USGS - Subsidence wells 6,250 USGS - Modeling 67,919 Saltwater remediation 85,747 Meetings 798 Office supplies 1,639 Rent 16,200 Travel 5,084 Postage 425 Insurance 413 Dues and subscriptions 2,895 Printing 732 Miscellaneous 1,621 Professional fees 26,528 Total Operating Expenses 383,086 NON-OPERATING REVENUES (EXPENSES) Operating Income 200,397 Interest income Total Non-Operating Revenues (Expenses) Change in Net Position 2,429 2, ,826 Total Net Position, beginning of year as restated Total Net Position, ending 815,896 $ 1,018,722 The accompanying notes are an integral part of these statements. II

15 BATON ROUGE, LOUISIANA STATEMENT OF CASH FLOWS YEAR END JUNE 30,2018 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers Cash paid to suppliers for goods/services Cash paid to employees for services Business-type Activities 558,685 (177,305) (139,255) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Net Cash Provided by Operating Activities 242,125 Acquisition of capital assets (6,563) Net Cash Used for Capital and Related Financing Activities (6,563) CASH FLOWS FROM INVESTING ACTIVITIES Interest income Purchase of investments 2,429 (40,690) Net Cash Used by Investing Activities (38,261) Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents, beginning of year 197, ,578 Cash and Cash Equivalents, end of year $ 869,879 Continued 12

16 BATON ROUGE, LOUISIANA STATEMENT OF CASHFLOWS (Continued) YEAR END JUNE 30,2018 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Business-type Activities Operating income (loss) 200,397 Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation (Increase) decrease in assets: Accounts receivable Prepaid expenses (Increase) decrease in deferred outflows of resources: Deferred outflows related to pensions Increase (decrease) in liabilities: Accounts payable Accrued expenses Compensated absences payable Other post-employment benefits plan payable Net pension liability (Increase) decrease in deferred inflows of resources: Deferred inflows related to pensions Net Cash Provided by Operating Activities 10,386 (24,798) (4,146) 21,346 60,824 (2,020) 251 (3,301) (13,842) (2,972) 242,125 The accompanying notes are an integral part of these statements. 13

17 NOTES TO FINANCIAL STATEMENTS 14

18 INDEX TO NOTES TO FINANCIAL STATEMENTS JUNE 30,2018 Note No. Description Page No. Introduction 16 1 Summary of Significant Accounting Policies 16 2 Cash and Cash Equivalents 19 3 Investments 19 4 Receivables 19 5 Capital Assets 20 6 Accounts and Other Payables 20 7 Leave 20 8 Pensions 21 9 Postemployment Benefits Other Than Pensions (OPEB) Leases Long-Term Liabilities Related Party Transactions Contingent Liabilities Restatement of Beginning Net Position Subsequent Events 33 15

19 NOTES TO FINANCIAL STATEMENTS JUNE 30,2018 INTRODUCTION The Capital Area Groundwater Conservation District was created under the provisions of Louisiana Revised Statutes 38: to provide for the effective administration, conservation, orderly development, and supplementation of groundwater resources within the conservation district, which is composed of the parishes of East Baton Rouge, East Feliciana, Pointe Coupee, West Baton Rouge, and West Feliciana. The District monitors the usage of groundwater within the District and provides assistance through the United States Geological Survey for the development of new sources of groundwater. The District is governed by a board of commissioners composed of seventeen members appointed by the governor. The accompanying financial statements of the Capital Area Groundwater Conservation District have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying basic financial statements of the Capital Area Groundwater Conservation District (the District) have been prepared in conformity with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board (GASB). The basic financial statements present the financial position, results of operations, and cash flows of the District as of and for the year ended June 30, Financial Reporting Entity: As required by GASB Statement No. 61, The Financial Reporting Entity - an amendment of GASB Statements No. 14 and No. 34, the District is considered a related organization of the State of Louisiana. The accompanying financial statements present only the transactions of the Capital Area Groundwater Conservation District. Basis of Presentation - Fund Accounting: Proprietary funds are used to account for the District's ongoing operations and activities which are similar to those in the private sector. Proprietary funds are accounted for using a flow of economic resources measurement focus under which all assets and all liabilities associated with the operation of these funds are included in the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Net Position presents increases (revenues) and decreases (expenses) in total net position. The District maintains one proprietary fund, the General Fund. Basis of Accounting: The District prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. Such principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Pursuant to GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, the District has elected to apply the 16

20 NOTES TO FINANCIAL STATEMENTS JUNE 30,2018 provisions of all relevant pronouncements of the Financial Accounting Standards Board (FASB), excluding those issued after November 30, Basis of Reporting: The District has adopted GASB Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis -for State and Local Governments and also the required portions of GASB Statement No. 37, Basic Financial Statements - for State and Local Governments - and Management's Discussion and Analysis - for State and Local Governments: Omnibus and Statement No. 38, Certain Financial Statement Note Disclosures, which modified the disclosure requirements of GASB No. 34. GASB No. 34 established standards for external reporting for all state and local governmental entities. It requires the classification of net position into three components - invested in capital assets, net of related debt; restricted; and unrestricted. These classifications are defined as follows: Invested in Capital Assets, Net of Related Debt: This component of net position consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted: This component of net position consists of constraints placed on net position use through external constraints imposed by creditors (such as through debt covenants), grantors, contributors, laws and regulations of other governments, or constraints imposed by law through constitutional provisions or enabling legislation. Unrestricted: This component of net position consists of net position that does not meet the definition of restricted, or invested in capital assets, net of related debt. Budgets and Budgetary Accounting: Subject to the Louisiana Licensing Agency Budget Act established by Louisiana Revised Statutes 39: , the District adopts an annual budget prepared in accordance with the basis of accounting utilized by that fund. The Commission must approve any revisions that alter the total expenditures. Although budget amounts lapse at year end, the District retains its unexpended fund balances to fund expenditures in the succeeding year. Cash and Cash Equivalents: Cash and cash equivalents include amounts in interest-bearing demand deposits. Under state law, the District may deposit funds in demand deposits, interest-bearing demand deposits, money market accounts or time deposits with state banks organized under Louisiana law and national banks having their principal offices in Louisiana. For purposes of the statement of cash flows, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents. Investments: Investments are limited by Louisiana Revised Statute 33:2955. If the original maturities of investments exceed 90 days, they are classified as investments. Otherwise, the investments are classified as cash and cash equivalents. In accordance with GASB Statement No. 31, investments are recorded at fair value with the corresponding increase or decrease reported in investment earnings. 17

21 NOTES TO FINANCIAL STATEMENTS JUNE 30,2018 The District's policy is tailored after Louisiana Revised Statute 49:327 and prohibits investments with maturities extending beyond twelve months. The policy also requires that three quotes be obtained from allowable financial institutions as to interest rates and that the amounts of the investment not exceed an amount insured by FDIC ($250,000) and pledged collateral at any one institution. Inventory: Inventory of the District includes only office supplies and printed materials, the amount of which is considered immaterial. Therefore, the acquisition of these items is expensed when purchased, and the inventory on hand at year-end is not reported in the accompanying financial statements. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Capital Assets: Capital assets are recorded at historical cost. Depreciation is recorded using the straight-line method over the useful lives of the assets. Generally, the District includes all capital acquisitions with a cost of $1,000 in its fixed asset inventory. However, certain items at a cost below that amount may be capitalized if benefits of the item will extend beyond one year and/or the District wants to monitor the item. Compensated Absences: Employees of the District earn and accumulate vacation and sick leave at varying rates depending on their years of service. The amount of vacation and sick leave that may be accumulated by each employee is unlimited. Upon termination, however, employees or their heirs are compensated for only up to 300 hours of unused vacation leave. This is computed at the employee's hourly rate of pay at the time of termination. Upon retirement, unused vacation leave in excess of 300 hours plus unused sick leave are used to compute retirement benefits. At June 30,2018, employees of the District had accumulated and vested $10,095 in employee leave benefits, which was computed in accordance with GASB Codification Section C Deferred Outflows/Inflows of Resources: The statement of Financial Position will often report a separate section for deferred outflows and (or) deferred inflows of financial resources. Deferred outflows of resources represent a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. Deferred inflows of resources represent an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources until that time. Adoption of New Accounting Principles: For the year ended June 30,2018, GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Statement 75 addresses accounting and financial reporting for health care and life insurance that are provided to employees of state and local governments. In addition. Statement No. 75 supersedes portions of GASB Statements No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multi- Employer Plans. Most significantly, the District is required to recognize the remaining liability for its proportionate share of the OPEB liability of the State of Louisiana's retiree health plan presented in note 8. 18

22 NOTES TO FINANCIAL STATEMENTS JUNE 30,2018 NOTE 2 - CASH AND CASH EQUIVALENTS The following is a summary of cash and cash equivalents at June 30, 2018: Book Balance Bank Balance Interest-bearing demand deposits $ $ Total $ $ These deposits are stated at cost, which approximates market. Under state law, they must be secured by federal deposit insurance or the pledge of securities owned by the fiscal agent bank. The market value of the pledged securities plus the federal deposit insurance must at all times equal the amount on deposit with the fiscal agent. These securities are held in the name of the pledging fiscal agent bank in a holding, or custodial bank that is mutually acceptable to both parties. With the adoption of GASB Statement No. 40, only deposits that are considered exposed to custodial credit risk are required to be disclosed. The District does not have any deposits that fall within this category. NOTE 3 - INVESTMENTS Investments can be exposed to custodial credit risk if the securities underlying the investment are uninsured and unregistered, not registered in the name of the entity or are held either by the counter-party or the counter-party's trust department or agent but not in the entity's name. The District does not have any investments subject to credit risk. All investments are certificates of deposit with maturities extending beyond 90 days. At June 30, 2018, the District had certificates whose reported amount equaled its fair value as follows: Maturitv Interest Rate Amount Citizens Bank & Trust 1/04/ % $40,000 Citizens Bank & Trust 3/04/ % 43,867 Citizens Bank & Trust 1 /22/ % 40,670 Accrued interest through 6/30/2018 2% Total NOTE 4 - RECEIVABLES The following is a summary of receivables at June 30, 2018: Class of Receivables Pumpage fees $ 151,551 Parish cooperative agreements Total $

23 NOTES TO FINANCIAL STATEMENTS JUNE 30,2018 NOTE 5 - CAPITAL ASSETS Capital asset activity for the year ended June 30, 2018, was as follows: Beginning Ending Balance Additions Deductions Balance Capital Assets, not being depreciated: Land $ 11,823 $ $ - $ 11,823 Capital Assets, being depreciated: Monitoring wells 370, ,025 Less: accumulated depreciation ) f7.400) ( ) Net Monitoring wells 247,196 (7,400) 239,796 Equipment, furniture and fixtures 21,906 1,563 23,469 Less: accumulated depreciation ) 0,319) (20.550) Net Equipment, etc On-line bill payment system _ 5,000 5,000 Less: accumulated depreciation ) (1.667) Net On-line system Net Capital Assets, being depreciated (3.823) Net Capital Assets 26K694 (3,823) NOTE 6 - ACCOUNTS AND OTHER PAYABLES The following is a summary of payables at June 30, 2018: Class of Payables Accounts $ 63,587 Accrued expenses Total $ NOTE 7-LEAVE Annual and Sick Leave. The District's employees earn and accumulate annual and sick leave at varying rates depending on their years of full-time service and are credited at the end of each month of regular service. Accumulated leave is carried forward to succeeding years without limitation. Requests for leave must be made to the employee's immediate supervisor and approved by the Executive Director or his/her designee. Upon termination, employees are compensated for up to 300 hours of unused annual leave at the employee's hourly rate of pay at the time of termination. Upon retirement, unused annual leave in excess of 300 hours plus unused sick leave is used to compute retirement benefits. 20

24 NOTES TO FINANCIAL STATEMENTS JUNE 30,2018 The cost of leave privileges, computed in accordance with GASB Codification Section C60, is recognized as current year expenditures when leave is earned. Only annual leave is accrued in the accompanying statement of net position, the amount unpaid at June 30, 2018 and 2017, being $10,095 and $9,844, respectively. Compensatory Leave. Non-exempt employees, according to the guidelines contained in the Fair Labors Standards Act, may be paid for compensatory leave earned. Upon termination or transfer, an employee is paid for any time and one-half compensatory leave earned and may or may not be paid for any straight hour-for-hour compensatory leave earned. This pay is based on the employee's hourly rate of pay at the time of termination or transfer. Compensatory leave was not accrued at June 30, NOTE 8-PENSIONS Summary of Significant Accounting Policies Pensions For purposes of measuring the Net Pension Liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Louisiana State Employees' Retirement System (LASERS) and additions to/deductions from LASERS' fiduciary net position have been determined on the same basis as they are reported by LASERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. General Information about the Pension Plan Plan Description Employees of the Capital Area Groundwater Conservation District are provided with pensions through a cost-sharing multiple-employer defined benefit plan administered by the Louisiana State Employees' Retirement System (LASERS). Section 401 of Title 11 of the Louisiana Revised Statutes (La. R.S. 11:401) grants to LASERS Board of Trustees and the Louisiana Legislature the authority to review administration, benefit terms, investments, and funding of the plan. LASERS issues a publicly available financial report that can be obtained at Benefits Provided The following is a description of the plan and its benefits and is provided for general information purposes only. Participants should refer to the appropriate statutes for more complete information. Retirement Benefits The age and years of creditable service required in order for a member to retire with full benefits are established by statute, and vary depending on the member's hire date, employer, and job classification. Our rank and file members hired prior to July 1,2006, may either retire with full benefits at any age upon completing 30 years of creditable service or at age 60 upon completing ten years of creditable service 21

25 NOTES TO FINANCIAL STATEMENTS JUNE 30,2018 depending on their plan. Those members hired between July 1, 2006 and June 30, 2015, may retire at age 60 upon completing five years of creditable service and those hired on or after July 1,2015 may retire at age 62 upon completing five years of creditable service. The basic annual retirement benefit for members is equal to 2.5% to 3.5% of average compensation multiplied by the number of years of creditable service. Additionally, members may choose to retire with 20 years of service at any age, with an actuarially reduced benefit. Average compensation is defined as the member's average annual earned compensation for the highest 36 consecutive months of employment for members employed prior to July 1, For members hired July 1,2006 or later, average compensation is based on the member's average annual earned compensation for the highest 60 consecutive months of employment. The maximum annual retirement benefit cannot exceed the lesser of 100% of average compensation or a certain specified dollar amount of actuarially determined monetary limits, which vary depending upon the member's age at retirement. Judges, court officers, and certain elected officials receive an additional annual retirement benefit equal to 1.0% of average compensation multiplied by the number of years of creditable service in their respective capacity. As an alternative to the basic retirement benefits, a member may elect to receive their retirement throughout their life, with certain benefits being paid to their designated beneficiary after their death. Act 992 of the 2010 Louisiana Regular Legislative Session, changed the benefit structure for LASERS members hired on or after January 1, This resulted in three new plans: regular, hazardous duty, and judges. The new regular plan includes regular members and those members who were formerly eligible to participate in specialty plans, excluding hazardous duty and judges. Regular members and judges are eligible to retire at age 60 after five years of creditable service and, may also retire at any age, with a reduced benefit, after 20 years of creditable service. Hazardous duty members are eligible to retire with twelve years of creditable service at age 55,25 years of creditable service at any age or with a reduced benefit after 20 years of creditable service. Average compensation will be based on the member's average annual earned compensation for the highest 60 consecutive months of employment for all three new plans. Members in the regular plan will receive a 2.5% accrual rate, hazardous duty plan a 3.33% accrual rate, and judges a 3.5% accrual rate. The extra 1.0% accrual rate for each year of service for court officers, the governor, lieutenant governor, legislators, House clerk, sergeants at arms, or Senate secretary, employed after January 1, 2011, was eliminated by Act 992. Specialty plan and regular members, hired prior to January 1, 2011, who are hazardous duty employees have the option to transition to the new hazardous duty plan. Act 226 of the 2014 Louisiana Regular Legislative Session established new retirement eligibility for members of LASERS hired on or after July 1, 2015, excluding hazardous duty plan members. Regular members and judges under the new plan are eligible to retire at age 62 after five years of creditable service and, may also retire at any age, with a reduced benefit, after 20 years of creditable service. Average compensation will be based on the member's average annual earned compensation for the highest 60 consecutive months of employment. Members in the regular plan will receive a 2.5% accrual rate, and judges a 3.5% accrual rate, with the extra 1.0% accrual rate based on all years of service as a judge. Members of the Harbor Police Retirement System who were members prior to July I, 2014, may retire after 25 years of creditable service at any age, 12 years of creditable service at age 55, 20 years of creditable service at age 45, and 10 years of creditable service at age 60. Average compensation for the plan is the member's average annual earned compensation for the highest 36 consecutive months of employment, with a 3.33% accrual rate. 22

26 NOTES TO FINANCIAL STATEMENTS JUNE 30,2018 A member leaving employment before attaining minimum retirement age, but after completing certain minimum service requirements, becomes eligible for a benefit provided the member lives to the minimum service retirement age, and does not withdraw their accumulated contributions. The minimum service requirement for benefits varies depending upon the member's employer and service classification. 1. Deferred Retirement Benefits The State Legislature authorized LASERS to establish a Deferred Retirement Option Plan (DROP). When a member enters DROP, their status changes from active member to retiree even though they continue to work and draw their salary for a period of up to three years. The election is irrevocable once participation begins. During DROP participation, accumulated retirement benefits that would have been paid to each retiree are separately tracked. For members who entered DROP prior to January 1, 2004, interest at a rate of one-half percent less than the System's realized return on its portfolio (not to be less than zero) will be credited to the retiree after participation ends. At that time, the member must choose among available alternatives for the distribution of benefits that have accumulated in the DROP account. Members who enter DROP on or after January 1, 2004, are required to participate in LASERS Self-Directed Plan (SDP) which is administered by a third-party provider. The SDP allows DROP participants to choose from a menu of investment options for the allocation of their DROP balances. Participants may diversify their investments by choosing from an approved list of mutual funds with different holdings, management styles, and risk factors. Members eligible to retire and who do not choose to participate in DROP may elect to receive at the time of retirement an initial benefit option (IBO) in an amount up to 36 months of benefits, with an actuarial reduction of their future benefits. For members who selected the IBO option prior to January 1, 2004, such amount may be withdrawn or remain in the IBO account earning interest at a rate of one-half percent less than the System's realized return on its portfolio (not to be less than zero). Those members who select the IBO on or after January 1, 2004, are required to enter the SDP as described above. For members who are in the Harbor Police Plan, the annual DROP Interest Rate is the three-year average (calculated as the compound average of 36 months) investment return of the plan assets for the period ending the June 30th immediately preceding that given date. The average rate so determined is to be reduced by a "contingency" adjustment of 0.5%, but not to below zero. DROP interest is forfeited if member does not cease employment after DROP participation. 2. Disability Benefits Generally, active members with ten or more years of credited service who become disabled may receive a maximum disability retirement benefit equivalent to the regular retirement formula without reduction by reason of age. Upon reaching age 60, the disability retiree may receive a regular retirement benefit by making application to the Board of Trustees. For injuries sustained in the line of duty, hazardous duty personnel in the Hazardous Duty Services Plan will receive a disability benefit equal to 75% of final average compensation. Members of the Harbor Police Retirement System who become disabled may receive a non-line of duty disability benefit after five years or more of credited service. Members age 55 or older may receive a disability benefit equivalent to the regular retirement benefit. Under age 55, the disability benefit is equal to 40% of final average compensation. Line of duty disability benefits are equal to 60% of final average 23

27 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2018 compensation, regardless of years of credited service. If the disability benefit retiree is permanently confined to a wheelchair, or, is an amputee incapable of serving as a law enforcement officer, or the benefit is permanently legally binding, there is no reduction to the benefit if the retiree becomes gainfully employed. 3. Survivor's Benefits Certain eligible surviving dependents receive benefits based on the deceased member's compensation and their relationship to the deceased. The deceased regular member hired before January 1, 2011 who was in state service at the time of death must have a minimum of five years of service credit, at least two of which were earned immediately prior to death, or who had a minimum of twenty years of service credit regardless of when earned in order for a benefit to be paid to a minor or handicapped child. Benefits are payable to an unmarried child until age 18, or age 23 if the child remains a full-time student. The aforementioned minimum service credit requirement is ten years for a surviving spouse with no minor children, and benefits are to be paid for life to the spouse or qualified handicapped child. The deceased regular member hired on or after January 1, 2011, must have a minimum of five years of service credit regardless of when earned in order for a benefit to be paid to a minor child. The aforementioned minimum service credit requirements for a surviving spouse are 10 years, 2 years being earned immediately prior to death, and active state service at the time of death, or a minimum of 20 years of service credit regardless of when earned. A deceased member's spouse must have been married for at least one year before death. Non-line of duty survivor benefits of the Harbor Police Retirement System may be received after a minimum of five years of credited service. Survivor benefits paid to a surviving spouse without children are equal to 40% of final average compensation, and cease upon remarriage. Surviving spouse with children under 18 benefits are equal to 60% of final average compensation, and cease upon remarriage, and children turning 18. No minimum service credit is required for line of duty survivor benefits which are equal to 60% of final average compensation to surviving spouse, regardless of children. Line of duty survivor benefits cease upon remarriage, and then benefit is paid to children under Permanent Benefit Increases/Cost-of-Living Adjustments As fully described in Title 11 of the Louisiana Revised Statutes, the System allows for the payment of permanent benefit increases, also known as cost-of-living adjustments (COLAs), that are funded through investment earnings when recommended by the Board of Trustees and approved by the State Legislature. Contributions Contribution requirements of active employees are governed by Section 401 of Title 11 of the Louisiana Revised Statutes (La. R.S. 11:401) and may be amended by the Louisiana Legislature. Employee and employer contributions are deducted from a member's salary and remitted to LASERS by participating employers. The rates in effect during the year ended June 30, 2018 for the various plans follow: 24

28 NOTES TO FINANCIAL STATEMENTS JUNE 30,2018 Plan Employee Employer Plan Status Rate Rate Appellate Law Clerks Closed 7.50% 37.90% Appellate Law Clerks hired on or after 7/01/06 Open 8.00% 37.90% Alcohol Tobacco Control Closed 9.00% 32.70% Bridge Police Closed 8.50% 36.50% Bridge Police hired on or after 7/01/06 Closed 8.50% 36.50% Corrections Primary Closed 9.00% 33.20% Corrections Secondary Closed 9.00% 37.60% Harbor Police Closed 9.00% 6.10% Hazardous Duty Open 9.50% 38.30% Judges hired before 1/01/11 Closed 11.50% 40.10% Judges hired after 12/31/10 Closed 13.00% 39.60% Judges hired on or after 7/01/15 Open 13.00% 39.60% Legislators Closed 11.50% 41.70% Optional Retirement Plan (ORP) before 7/01/06* Closed 7.50% 33.80% Optional Retirement Plan (ORP) on or afer 7/01/06* Closed 8.00% 33.80% Peace Officers Closed 9.00% 36.70% Regular Employees hired before 7/01/06 Closed 7.50% 37.90% Regular Employees hired on or after 7/01/06 Closed 8.00% 37.90% Regular Employees hired on or after 1/01/11 Closed 8.00% 37.90% Regular Employees hired on or after 7/01/15 Open 8.00% 37.90% Special Legislative Employees Closed 9.50% 43.70% Wildlife Agents Closed 9.50% 46.60% *For ORP the projected employer contribution effort was calculated using the shared UAL portion of the contribution rate. The information above can be found in the current Employer Pension Audit Report located The data provided is sample data only. The agency's contractually required composite contribution rate for the year ended June 30, 2018 was 37.9% of annual payroll, actuarially determined as an amount that, when combined with employee contributions, is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any Unfunded Actuarial Accrued Liability. Contributions to the pension plan from the Agency were $225,881 for the year ended June 30, Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2018, the Employer reported a liability of $257,621 for its proportionate share of the Net Pension Liability. The Net Pension Liability was measured as of June 30, 2017 and the total pension 25

29 NOTES TO FINANCIAL STATEMENTS JUNE 30,2018 liability used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. The Agency's proportion of the Net Pension Liability was based on a projection of the Agency's long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. At June 30, 2017, the Agency's proportion was % which was an increase of % from its proportion measured as of June 30, For the year ended June 30, 2018, the Agency recognized pension expense of $23,573 plus employer's amortization of change in proportionate share and differences between employer contributions and proportionate share of contributions, $8,292. At June 30, 2018, the Agency reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ - $ (4,727) i Changes of assumptions $ 1,018 $ Net difference between projected and actual earnings on pension plan investments $ 8,377 $ Changes in proportion and differences between Employer contributions and proportionate share of contributions $ 9,257 $ (145) Employer contributions subsequent to the measurement date 27,447 Total $ 46,099 $ (4,872) $27,447 reported as deferred outflows of resources related to pensions resulting from Agency contributions subsequent to the measurement date will be recognized as a reduction of the Net Pension Liability in the year ended June 30, Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended June 30: 2019 $ 5, $ 20, $ 3, $ (5,187) 26

30 NOTES TO FINANCIAL STATEMENTS JUNE 30,2018 Actuarial Assumptions A summary of the actuarial methods and assumptions used in determining the total pension liability as of June 30, 2017 are as follows: Valuation Date Actuarial Cost Method Actuarial Assumptions: Expected Remaining Service Lives Investment Rate of Return Inflation Rate Mortality Termination, Disability, and Retirement Salary Increases June 30, 2017 Entry Age Normal 3 years 7.70% per annum, net of investment expenses* 2.75% per annum Non-disabled members - Mortality rates based on the RP-2000 Combined Healthy Mortality Table with mortality improvement projected to Disabled members - Mortality rates based on the RP Disabled Retiree Mortality Table, with no projection for mortality improvement. Termination, disability, and retirement assumptions were projected based on a five-year ( ) experience study of the System's members. Salary increases were projected based on a experience study of the System's members. The salary increase ranges for specific types of members are: Lower Upper Member Type Range Range Regular 3.8% 12.8% Judges 2.8% 5.3% Corrections 3.4% 14.3% Hazardous Duty 3.4% 14.3% Wildlife 3.4% 14.3% Cost of Living Adjustments The present value of future retirement benefits is based on benefits currently being paid by the System and includes previously granted cost of living increases. The projected benefit payments do not include provisions for potential future increases not yet authorized by the Board of Trustees as they were deemed not to be substantively automatic. *The investment rate of return used in the actuarial valuation for funding purposes was 8.15%, recognizing an additional 25 basis points for gain-sharing and 15 basis points to offset administrative expenses. 27

31 NOTES TO FINANCIAL STATEMENTS JUNE 30,2018 The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation of 3.25% and an adjustment for the effect of rebalancing/diversification. The resulting expected long-term rate of return is 8.72% for Best estimates of geometric real rates of return for each major asset class included in the pension plan's target asset allocation as of June 30, 2017 are summarized in the following table: Long-Term Expected Real Asset Class Target Allocation^ Rate of Return^ Cash 0% -0.24% Domestic Equity 25% 4.31% International Equity 32% 5.35% Domestic Fixed Income 8% 1.73% International Fixed Income 6% 2.49% Alternative Investments 22% 7.41% Global Tactical Asset Allocation 7% 2.84% 100% 5.26% 77ie information above can be found in the current Employer Pension Audit Report located The data provided is sample data only. Discount Rate The discount rate used to measure the total pension liability was 7.70%. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current contribution rates and that contributions from participating employers will be made at the actuarially determined rates approved by PRSAC taking into consideration the recommendation of the pension plan's actuary. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the longterm expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the Employer's Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the Employer's proportionate share of the Net Pension Liability using the discount rate of 7.70%, as well as what the Employer's proportionate share of the Net Pension Liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate: 28

32 1.0% Decrease Current Discount 1.0% Increase (6.70%) Rate (7.70%) (8.70%) Employer's proportionate share of the net pension liability $ 323, ,621 i i $ 201,682 The information above can be found in the current GASB 68 Schedules of Employer located Pension Plan Fiduciary Net Position Detailed information about the pension plan's fiduciary net position is available in the separately issued LASERS 2017 Comprehensive Annual Financial Report at Payables to the Pension Plan At June 30, 2018, the District had $3,061 in payables to LASERS for the June 2018 employee and employer legally-required contributions. NOTE 9 - POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB^ The Office of Group Benefits (0GB) administers the State of Louisiana Post-Retirement Benefits Plan - a defmed-benefit. Multi-employer other post-employment benefit plan. The plan provides medical, prescription drug, and life insurance benefits to retirees, disabled retirees, and their eligible beneficiaries through premium subsidies. Current employees, who participate in an 0GB health plan while active, are eligible for plan benefits if they are enrolled in the 0GB health plan immediately before the date of retirement and retire under one of the state sponsored retirement systems (Louisiana State Employees' Retirement System, Teachers' Retirement System of Louisiana, or Louisiana State Police Retirement System), or they retire from a participating employer that meets the qualifications in the Louisiana Administrative Code 32: Benefit provisions are established under R.S. 42:851 for health insurance benefits and R.S. 42:821 for life insurance benefits. The obligations of the plan members, employer(s), and other contributing entities to contribute to the plan are established or may be amended under the authority of R.S. 42:802. There are no assets accumulated in a trust that meets the criteria of paragraph 4 of GASB Statement No. 75. Effective July 1, 2018, an OPEB trust fund was statutorily established; however, this plan is not administered as a trust and no plan assets have been accumulated as of June 30, 2018.The plan is funded on a "pay-as-you-go" under which the contributions to the plan are generally made at about the same time and in about the same amount as benefit payments become due. Employer contributions are based on plan premiums and the employer contribution percentage. Premium amounts vary depending on the health plan selected ad if the retired member has Medicare coverage. 0GB offers retirees four self-insured healthcare plans and one fully insured plan. Retired employees who have Medicare Part A and B coverage also have access to four fully insured Medicare Advantage Plans. The employer contribution percentage is based on the date of participation in an 0GB plan and employee years of service at retirement. Employees who begin participation or rejoin the plan before January 1,2002. Pay approximately 25% of the cost of coverage (except single retirees under age 65, who pay approximately 25% of the active employee cost.) For those beginning participation or rejoining on or 29

33 NOTES TO FINANCIAL STATEMENTS JUNE 30,2018 after January 1,2002, the percentage of premiums contributed by the employer and retiree is based on the following schedule: Employer Retiree 0GB Particioation Share Share Under 10 years 19% 81% years 38% 62% years 56% 44% 20+ years 75% 25% In addition to healthcare benefits, retirees may elect to receive life insurance benefits. Basic and supplemental life insurance is available for individual retirees and spouses of retirees subject to maximum values. Employers pay approximately 50% of monthly premiums for individual retirees. The retiree is responsible for 100% of the premium for dependents. Effective January 1, 2018, the total monthly premium for retirees varies according to age group. Total Collective OPEB Liability and Changes in Total Collective OPEB Liability At June 30,2018, The District reported a liability of $108,049 for its proportionate share of the total collective OPEB liability. The total collective OPEB liability was measured as of July 1, 2017, and was determined by an actuarial valuation as of that date. The District's proportionate share of the restated total collective OPEB liability at June 30,2016 totaling $111,350, was determined using a roll back of the same valuation to July 1, 2016, using the discount rate applicable on that date, and assuming no gains or losses. The District's proportionate share percentage is based on the employer's individual OPEB actuarial accrued liability in relation to the total OPEB actuarial accrued liability for all participating entities included in the State of Louisiana reporting entity. At June 30, 2018, the District's proportionate share was.0012%. Because the beginning balance was restated using a rollback of the July 1, 2017 valuation assuming no gains or losses, there is no change to the proportion since the prior measurement date. The total collective OPEB liability in the July 1, 2017 actuarial valuation was determined using the following actuarial methods, assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified: Actuarial Cost Method - Entry Age Normal, level percentage of pay Estimated Remaining Service Lives Inflation Rate - Consumer Price Index (CPI) 2.8% Salary Increase Rate - consistent with pension plan disclosed in note 8 Discount rate % based on June 30, 2017 Standard & Poor's 20-year municipal bond index rate Mortality Rates - based on RP-2014 Combined Healthy Mortality Table, or RP-2014 Disabled Retiree Mortality Table; both tables projected on a fully generational basis by Mortality Improvement Scale MP

34 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2018 Healthcare cost trends - 7% for pre-medicare eligible employees grading down by.25% each year, beginning in , to an ultimate rate of 4.5% in 2029; 5.5% for post-medicare eligible employees grading down by.25% each year, beginning in , to an ultimate rate of 4.5% in and thereafter; the initial trend was developed using the National Health Care Trend Survey; the ultimate trend was developed using a building block approach which considers Consumer Price Index, Gross Domestic Product, and technology growth. Changes of assumptions and other inputs reflect a change in the discount rate from 2.71% as of July to July 1,2017. Sensitivity of the proportionate share of the total collective OPEB liabilitv to changes in the discount rate The following presents the District's proportionate share of the total collective OPEB liability using the current discount rate as well as what the District's proportionate share of the total collective OPEB liability would be if it were calculated using a discount rate that is one percentage-point lower or one percentage-point higher than the current rate: Proportionate Share of Total Collective OPEB 1.0% Decrease Current Discount 1.0% Increase (2.13%) Rate (3.13%) (4.13%) Liability $ 127, ,049 92,676 Sensitivity of the proportionate share of the total collective OPEB liabilitv to changes in the healthcare cost trend rates The following presents the District's proportionate share of the total collective OPEB liability using the current healthcare cost trend rates as well as what the District's proportionate share of the total collective OPEB liability would be if it were calculated using healthcare cost trend rates that are one percentage-point lower or one percentage-point higher than the current rate: Proportionate Share of Total Collective OPEB 1.0% Decrease Current Discount 1.0% Increase (6%decreasing to Rate 7%decreasing to (8%decreasing to 3.5%) 4.5%) 5.5%) Liability $ 92,941 j $ 108,049 $ 127,018 OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended June 30, 2018, the District recognized OPEB expense of $2,894. At June 30, 2018, the District reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: 31

35 NOTES TO FINANCIAL STATEMENTS JUNE 30,2018 Deferred Outflows of Resources Deferred Inflows of Resources Changes of assumptions $ - $ (6,195) Employer contributions subsequent to the measurement date $ 6,081 Total $ 6,081 $ (6,195) Deferred outflows of resources related to OPEB resulting from the District's benefit payments subsequent to the measurement date will be recognized as a reduction to the total collective liability in the year ended June 30, Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as OPEB expense as follows: NOTE 10-LEASES Year ended June 30: 2019 $(1,395) 2020 (1,395) 2021 (1,395) 2022 (1,395) 2023 (615) Total Operating Leases. The District has a sixty month on its office space requiring a monthly payment of $1,350 or $16,200 per year through December 2019, and then $1,500 per month or $18,000 per year through December, A copier is leased on a seventy-two month basis from Kyocera with a minimum lease payment of $53 per month or $630 annually. Capital Leases. The District has no capital leases. 32

36 NOTES TO FINANCIAL STATEMENTS JUNE 30,2018 NOTE 11 - LONG-TERM LIABILITIES Long-term liability activity for the year ended June 30, 2018, was as follows: Beginning Balance Additions Reductions Compensated absences $ 44,249 $ 10,076 $ Other post-employment benefits 1,494,325-49,406 Net pension liability Amounts Ending Balance $ 54,325 1,444, Due Within One Year $ Total NOTE 12- RELATED PARTY TRANSACTIONS There were no related party transactions during the year. NOTE 13 - CONTINGENT LIABILITIES There are no contingent liabilities that require disclosure. NOTE 14 - RESTATEMENT OF BEGINNING NET POSITION The beginning net position as of July 1, 2017 has been restated to reflect the following adjustments: Net position at June 30, 2017 GASB 75 (OPEB) adjustment Net position at June 30, 2017 as restated $ 752, ,896 The OPEB restatement increased the District's beginning net position by $63,378. The restatement was due to the implementation of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Had the standard been implemented in fiscal year 2017 and included in the June 30, 2017 Statement of Revenues, Expenses and Changes in Net Position, the previously reported change in net position of $241,172 would have been $304,550. NOTE 15 - SUBSEOUENT EVENTS Management of the District has evaluated subsequent events through December 14, 2018, the date that the financial statements were to be issued and has determined that there are no significant subsequent events that require recognition or disclosure through that date. 33

37 REQUIRED SUPPLEMENTARY INFORMATION (PART 2 OF 2) 34

38 BATON ROUGE, LOUISIANA BUDGETARY COMPARISON SCHEDULE YEAR END JUNE 30,2018 Variance Budgeted Favorable Orifiinal Final Actual (Unfavorable) REVENUES Pumpage fees $ 600,000 $ 600,000 $ 583,483 $ (16,517) Interest income ,429 1,929 Total Revenues $ 600,500 $ 600,500 $ 585,912 $ (14,588) EXPENDITURES Salaries $ 102,000 $ 102,000 $ 103,952 $ (1,952) Other employee expenses 35,500 35,500 31,872 3,628 Other post employment benefits 24,000 24,000 2,894 21,106 Compensated absences (251) Depreciation ,385 (10,385) Information technology 8,000 10,000 8,661 1,339 USGS - Real time network 6,250 6,250 8,820 (2,570) USGS - Subsidence wells 6,500 6,500 6, USGS - Modeling 93, ,840 67,919 44,921 Saltwater remediation 258, ,000 85, ,253 Meetings 5,000 5, ,202 Office supplies 3,900 3,970 1,639 2,331 Rent 16,200 16,200 16,200 - Travel 6,000 8,000 5,084 2,916 Postage Insurance 7,000 7, ,587 Dues and subscriptions 1,200 1,200 2,895 (1,695) Printing 1,300 1, Miscellaneous 1,600 2,050 1, Professional fees 17,400 36,400 26,528 9,872 Total Expenditures $ 594,350 $ 636,910 $ 383,086 $ 253,824 Change in Net Position $ 6,150 $ (36,410) $ 202,826 $ 239,236 Net Assets, beginning $ 815,896 $ 815,896 $ 815,896 $ - Net Assets, ending $ 822,046 $ 779,486 $ 1,018,722 $ 239,236 35

39 Schedule of Employer's Share of Net Position Liability For the Ten Years Ended June 30, Employer's Proportion of the Net Pension Liability (Asset) % % % % Employer's Proportionate Share of the Net Pension 257, , , ,966 Employer's Covered-Employee Payroll"^ 68,245 68,250 62,025 57,741 Employer's Proportionate Share of the Net Pension Liability (Asset) as a Percentage of its Covered- Employee Payroll 377% 398% 358% 339% Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 65.0% 57.7% 62.7% 65.0% For reference only: ^Employer Covered-Employee Payroll as reported to LASERS during the measurement periods presented. 36

40 Schedule of Employer Contributions to the Pension Plan For the Year Ended June 30, 2018 Date Contributions in Relation to Contractually Contractually Contribution Employer's Contributions as Required Required Deficiency Covered Employee a % of Covered Contribution^ A Contribution (Excess) Payroll Employee Payroll ,726 24, , % ,509 24,509-68, % ,006 24,055 (L049) 62, % ,480 22,148 (668) 57, % 37

41 Notes to Required Supplementary Information 1. Schedule of Employer's Share of the Net Pension Liability This schedule reflects the participation of Capital Area Groundwater Conservation District's employees in LASERS and its proportionate share of the net pension liability as a percentage of its covered employee payroll, and the plan fiduciary net position as a percentage of the total pension liability. 2. Schedule of Employer's Contributions This schedule represents the employer contributions subsequent to the measurement date and recognized as a reduction of the net pension liability in future years. 3. Actuarial Assumptions for Net Pension Liability Valuation Date Actuarial Cost Method Actuarial Assumptions: Expected Remaining Service Lives Investment Rate of Retium Inflation Rate Mortality Termination, Disability, and Retirement Salary Increases June 30, 2017 Entry Age Normal 3 Years 7.70 % per annum for current year 2.75 % per annum for current year Non-disabled members - Mortality rates based on the RP-2000 Combined Healthy Mortality Table with mortality improvement projected to Disabled members - Mortality rates based on the RP-2000 Disabled Retiree Mortality Table, with no projection for mortality improvement. Termination, disability, and retirement assumptions were projected based on a five-year experience study ( ) of the System's members. Salary increases were projected based on a experience study of the System's members. The salary increase ranges for specific types of members are: Member Type Lower Range Upper Range Regular 3.8% 12.8% Judges 2.8% 5.3% Corrections 3.4% 14.3% Hazardous Duty 3.4% 14.3% Wildlife 3.4% 14.3% 38

42 Cost of Living Adjustments The present value of future retirement benefits is based on benefits currently being paid by the System and Includes previously granted cost of living increases. The projected benefit payments do not include provisions for potential future increases not yet authorized by the Board of Trustees as they were deemed not to be substantively automatic. 39

43 Schedule of Employer's Proportionate Share of the Total Collective OPEB Liability For the Ten Years Ended June 30, Employer's Proportion of the Collective OPEB Liability (Asset) % % Employer's Proportionate Share of the Collectve OPEB Liability 108, ,350 Employer's Covered-Employee Payroll^ 68,250 68,250 Employer's Proportionate Share of the Collective OPEB Liability (Asset) as a Percentage of its Covered-Employee Payroll 158% 163% This schedule is intended to show information for 10 years. Additional years will be presented as they become available. Notes to Required Supplementary Information There are no assets accumulated in a trust that meets the requirements in paragraph 4 of GASB Statement 75 to pay related benefits. 40

44 SUPPLEMENTARY INFORMATION 41

45 SCHEDULE OF PER DIEM PAID TO COMMISSION MEMBERS JUNE 30,2018 In compliance with House Concurrent Resolution No. 54 of the 1979 Session of the Louisiana Legislature, this schedule of per diem/compensation paid to Commission members is presented for the year ended June 30, Name Amount Albritton, Ronnie -0- Daniel, William, IV -0- Forsman, Johan -0- Frey, Mark -0- Hopkins, Lucas -0- Hugghins, Barry -0- Jennings, John -0- McGehee, Dennis -0- Metz, Julius -0- Morvant, Nelson -0- Reonas, Matthew -0- Rummler, Jens -0- Scardina, Ryan -0- Stephens, Thomas -0- Talbot, Todd -0- Town, Hays, Jr. -0- Walton, Mark -0- Total 42

46 BATON ROUGE, LOUISIANA SCHEDULE OF COMPENSATION, BENEFITS AND OTHER PAYMENTS TO AGENCY HEAD OR CHIEF EXECUTIVE OFFICER YEAR ENDED JUNE 30,2018 AGENCY HEAD NAME: Anthony J. Duplechin, Director PURPOSE AMOUNT Salary $ 31,335 Travel 2,477 Total $ 33,812 43

47 John L. McKowen Certified Public Accountant 2178Myr..eAvenue Baton Rouge, Louisiana gsi sitms, INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Commissioners of the Capital Area Groundwater Conservation District 3132 Valley Creek Drive Baton Rouge, Louisiana I have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the business-type activities of the Capital Area Groundwater Conservation District, a related organization of the State of Louisiana, as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the Capital Area Groundwater Conservation District's basic financial statements, and have issued my report thereon dated December 14, Internal Control over Financial Reporting In planning and performing my audit of the financial statements, 1 considered the Capital Area Groundwater Conservation District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing my opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Capital Area Groundwater Conservation District's internal control. Accordingly, I do not express an opinion on the effectiveness of the Capital Area Groundwater Conservation District's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet is important enough to merit attention by those charged with governance. Member American Institute of Certi^d Public Accountants Society of Louisiana Cert^d Public Accountants

48 My consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during my audit I did not identify any deficiencies in internal control that I consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Capital Area Groundwater Conservation District's financial statements are free of material misstatement, I performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of my audit and, accordingly, 1 do not express such an opinion. The results of my tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of my testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit conducted in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. John L. McKowen, CPA December 14,

49 SCHEDULE OF FINDINGS AND RESPONSES YEAR ENDED JUNE 30, 2018 I have audited the basic financial statements of the Capital Area Groundwater Conservation District as of and for the year ended June 30, 2018, and have issued my report thereon dated December 14, conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. My audit of the financial statements as of June 30, 2018, resulted in an unqualified opinion. Section I Summary of Auditor's Reports 1. Report on Internal Control and Compliance Material to the Financial Statements Internal Control Material Weakness x No Significant Deficiencies x No Compliance Compliance Material to F/S x No 46

50 SCHEDULE OF PRIOR YEAR FINDINGS AND RESPONSES YEAR ENDED JUNE 30,2017 Section I Summary of Auditor's Reports 1. Report on Internal Control and Compliance Material to the Financial Statements Internal Control Material Weakness x Yes Significant Deficiencies x Yes Compliance Compliance Material to F/S x Yes 2. Findings Financial Statements Condition: The District does not have any employees, nor has it engaged a third party, who has the qualifications and training to apply generally accepted accounting principles (GAAP) in recording the entity's financial transactions or preparing its financial statements, including the related notes. Criteria: Government Auditing Standards, issued by the Comptroller General of the Unites States requires governmental units to have employees or to engage a third party who has the qualifications and training to apply generally accepted accounting principles (GAAP) in recording the entity's financial transactions or preparing its financial statements, including the related notes. Management did not engage a third party capable of producing GAAP basis financial statements. Effect: The lack of ability to generate GAAP basis financial statements on the part of the District resulted in the auditor making several material adjustments to the financial statements. Recommendation: No recommendation. The District has evaluated the cost vs. benefit of engaging a qualified individual to prepare the necessary financial statements. The decision has been made to continue to allow the audit firm to prepare the financial statements and management reviews and takes responsibility for the information in the statements. Status: Resolved. The District did in fact engage the services of a CPA to set up the books on QuickBooks and prepare the financial statements Internal Control Condition: There is a lack of segregation of duties within the District office. Criteria: An important element in designing an internal accounting control system that safeguards assets and reasonably insures the reliability of the accounting records is the concept of segregation of responsibilities. Effect: No one person should be assigned duties that would allow that person to commit an error or perpetuate a fraud and to conceal the error or fraud. For example, the same person should not be 47

51 SCHEDULE OF PRIOR YEAR FINDINGS AND RESPONSES YEAR ENDED JUNE 30,2017 responsible for any two of the following functions: (1) authorization of a transaction, (2) recording the transaction, or (3) custody of the assets involved in the transaction. Recommendation: The entity should have a proper segregation of duties. Status: Resolved. The District has engaged an outside CPA, has revised its policies and procedures, and has received more oversight from its Commissioners, particularly its Chairman Collateralization Condition: Cash deposits are not fully insured or collateralized. Criteria: Louisiana R.S. 39:1225 requires public funds to be either insured by the Federal Deposit Insurance Corporation or by pledging securities owned by the bank. Effect: The District does not meet the requirements of Louisiana R.S. 39:125. Recommendation: Collateralized pledges should be made to cover the balance. Status: Resolved. The District took corrective action to ensure that deposits are fully collateralized Operating Policies and Procedures Condition: Administration has failed to establish a system of operating policies and procedures. Criteria: Written operating policies and procedures should be implemented to ensure that proper internal control is being implemented within the District. Effect: A lack of written policies and procedures weakens the District's internal control. Recommendation: The District should develop written operating policies and procedures. Status: Resolved. Management of the District has written a Policies and Procedures Manual Insufficient Accounting System Condition: The District's accounting system is not sufficient for the size of the entity. Criteria: Entities should establish an accounting system that is sufficient to properly record all transactions and bank accounts to one general ledger. Effect: All bank accounts were not properly recorded on one general ledger. Year end adjustments were not recorded. 48

52 SCHEDULE OF PRIOR YEAR FINDINGS AND RESPONSES YEAR ENDED JUNE 30,2017 Recommendation: The District should establish an accounting system that will include all transactions and bank accounts on one general ledger. Status: Resolved. The District purchased QuickBooks and engaged a CPA to record all current year transactions in the new system Late Submission of Report Condition: Audited financial statements were not filed timely. Criteria: The District's audit report should be filed no later than six months after its year end in accordance with Louisiana R.S. 24:513. Effect: The District was not in compliance with R.S. 24:513 Recommendation: The District should provide complete information to the auditor in a manner that enables timely completion of the audited financial statements. Status: Resolved. The District signed an engagement letter with a new auditor in April, 2018 and was able to provide complete information enabled timely completion of the audited financial statements. 49

53 John L. McKowen Certified Public Accountant 2178 Myrtle Avenue Office (225) Baton Rouge, Louisiana (225) CAPITAL AREA GROUNDWATER CONSERVATION BATON ROUGE, LOUISIANA INDEPENDENT ACCOUNTANT'S REPORT ON APPLYING AGREED UPON PROCEDURES YEAR ENDED JUNE 30,2018 To the Board of Commissioners Capital Area Groundwater Conservation District and the Louisiana Legislative Auditor Baton Rouge, Louisiana 1 have performed the procedures enumerated below, which were agreed to by the Capital Area Groundwater Conservation District (the District) and the Louisiana Legislative Auditor (LLA) on the control and compliance areas identified in the LLA's Statewide Agreed-Upon Procedures for the fiscal period July I, 2017 through June 30, The District's management is responsible for those control and compliance areas identified in the LLA's Statewide Agreed-Upon Procedures. This agreed-upon procedures engagement was performed in accordance with attestation standards established by the American Institute of Certified Public Accountants and applicable standards of Government Auditing Standards. The sufficiency of these procedures is solely the responsibility of the specified users of this report. Consequently, I make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. 1 was not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on those control and compliance areas identified in the LLA's Statewide Agreed-Upon Procedures. Accordingly, I do not express such an opinion or conclusion. Had I performed additional procedures, other matters might have come to my attention that would have been reported to you. The purpose of this report is solely to describe the scope of testing performed on those control and compliance areas identified in the LLA's Statewide Agreed-Upon Procedures, and the results of that testing, and not to provide an opinion on control and compliance. Accordingly, this report is not suitable for any other purpose. Under Louisiana Revised Statute 24:513, this report is distributed by the LLA as a public document. John L. McKowen, CPA Baton Rouge, Louisiana December 14, 2018 Member American Institute of Certifi^Public Accountants Society of Louisiana Certified^Public Accountants

54 Written Policies and Procedures 1. Obtain and inspect the entity's written policies and procedures and observe that they address each of the following categories and subcategories (if applicable to public funds and the entity's operations): a) Budgetings including preparing, adopting, monitoring, and amending the budget The District's written policies and procedures adequately address budgeting. b) Purchasings including (1) how purchases are initiated; (2) how vendors are added to the vendor list; (3) the preparation and approval process of purchase requisitions and purchase orders; (4) controls to ensure compliance with the public bid law; and (5) documentation required to be maintained for all bids and price quotes. The District's written policies and procedures adequately address purchasing. c) Disbursementss including processing, reviewing, and approving The District's written policies and procedures adequately address disbursements. d) Receipts/Collectionss including receiving, recording, and preparing deposits. Also, policies and procedures should include management's actions to determine the completeness of all collections for each type of revenue or agency fund additions (e.g. periodic confirmation with outside parties, reconciliation to utility billing after cutoff procedures, reconciliation of traffic ticket number sequences, agency fund forfeiture monies confirmation). The District's written policies and procedures adequately address receipts/collections. e) Payroll/Personnels including (1) payroll processing, and (2) reviewing and approving time and attendance records, including leave and overtime worked. The District's written policies and procedures adequately address payroll/personnel. f) Contracting, including (1) types of services requiring written contracts, (2) standard terms and conditions, (3) legal review, (4) approval process, and (5) monitoring process The District's written policies and procedures adequately address contracting. g) Credit Cards (and debit cards, fuel cards, P-Cards, if applicable), including (1) how cards are to be controlled, (2) allowable business uses, (3) documentation requirements, (4) required approvers of statements, and (5) monitoring card usage (e.g., determining the reasonableness of fuel card purchases) The District's written policies and procedures adequately address credit card usage. h) Travel and expense reimbursement, including (1) allowable expenses, (2) dollar thresholds by category of expense, (3) documentation requirements, and (4) required approvers The District's written policies and procedures adequately address travel and expense reimbursement. i) Ethics, including (1) the prohibitions as defined in Louisiana Revised Statute 42: , (2) actions to be taken if an ethics violation takes place, (3) system to monitor possible ethics violations, and (4) requirement that all employees, including elected officials, annually attest through signature verification that they have read the entity's ethics policy. 51

55 The District's written policies and procedures adequately address ethics. j) Debt Service, including (1) debt issuance approval, (2) continuing disclosure/emma reporting requirements, (3) debt reserve requirements, and (4) debt service requirements. Not applicable. Board or Finance Committee There were no exceptions in the prior year; therefore, the Board or Finance Committee section was not tested in the current year. 2. Obtain and inspect the board/finance committee minutes for the fiscal period, as well as the board's enabling legislation, charter, bylaws, or equivalent document in effect during the fiscal period, and: a) Observe that the board/finance committee met with a quorum at least monthly, or on a frequency in accordance with the board's enabling legislation, charter, bylaws, or other equivalent document. b) For those entities reporting on the governmental accounting model, observe that the minutes referenced or included monthly budget-to-actual comparisons on the general fund and major special revenue funds, as well as monthly financial statements (or budget-to-actual comparisons, if budgeted) for major proprietary funds. Alternately, for those entities reporting on the non-profit accounting model, observe that the minutes referenced or included financial activity relating to public funds if those public funds comprised more than 10% of the entity's collections during the fiscal period. a) For governmental entities, obtain the prior year audit report and observe the unrestricted fund balance in the general fund. If the general fund had a negative ending unrestricted fund balance in the prior year audit report, observe that the minutes for at least one meeting during the fiscal period referenced or included a formal plan to eliminate the negative unrestricted fund balance in the general fund. Bank Reconciliations There were no exceptions in the prior year; therefore, bank reconciliations were not tested in the current year. 3. Obtain a listing of client bank accounts for the fiscal period from management and management's representation that the listing is complete. Ask management to identify the entity's main operating account. Select the entity's main operating account and randomly select 4 additional accounts (or all accounts if less than 5). Randomly select one month from the fiscal period, obtain and inspect the corresponding bank statement and reconciliation for selected each account, and observe that: a) Bank reconciliations include evidence that they were prepared within 2 months of the related statement closing date (e.g., initialed and dated, electronically logged); b) Bank reconciliations include evidence that a member of management/board member who does not handle cash, post ledgers, or issue checks has reviewed each bank reconciliation (e.g., initialed and dated, electronically logged); and c) Management has documentation reflecting that it has researched reconciling items that have been outstanding for more than 12 months from the statement closing date, if applicable. 52

56 Collections 4. Obtain a listing of deposit sites for the fiscal period where deposits for cash/checks/money orders (cash) are prepared and management's representation that the listing is complete. Randomly select 5 deposit sites (or all deposit sites if less than 5). Management represents that there is one collection site. 5. For each deposit site selected, obtain a listing of collection locations and management's representation that the listing is complete. Randomly select one collection location for each deposit site (i.e. 5 collection locations for 5 deposit sites), obtain and inspect written policies and procedures relating to employee job duties (if no written policies or procedures, inquire of employees about their job duties) at each collection location, and observe that job duties are properly segregated at each collection location such that: a) Employees that are responsible for cash collections do not share cash drawers/registers. Employees who are responsible for cash collections do not share cash drawers/registers. b) Each employee responsible for collecting cash is not responsible for preparing/making bank deposits, unless another employee/official is responsible for reconciling collection documentation (e.g. pre-numbered receipts) to the deposit. Another employee is responsible for reconciling collection documentation to the deposit. c) Each employee responsible for collecting cash is not responsible for posting collection entries to the general ledger or subsidiary ledgers, unless another employee/official is responsible for reconciling ledger postings to each other and to the deposit. Another employee is responsible for reconciling ledger postings to each other and to the deposit. d) The employee(s) responsible for reconciling cash collections to the general ledger and/or subsidiary ledgers, by revenue source and/or agency fund additions are not responsible for collecting cash, unless another employee verifies the reconciliation. Another employee verifies the reconciliation. 6. Inquire of management that all employees who have access to cash are covered by a bond or insurance policy for theft. Management represents that all employees are covered by insurance policy for theft. 7. Randomly select two deposit dates for each of the 5 bank accounts selected for procedure #3 under "Bank Reconciliations" above (select the next deposit date chronologically if no deposits were made on the dates randomly selected and randomly select a deposit if multiple deposits are made on the same day). Alternately, the practitioner may use a source document other than bank statements when selecting the deposit dates for testing, such as a cash collection log, daily revenue report, receipt book, etc. Obtain supporting documentation for each of the 10 deposits and: a) Observe that receipts are sequentially pre-numbered. There were no cash receipts. b) Trace sequentially pre-numbered receipts, system reports, and other related collection documentation to the deposit slip. 53